Sky: What does ITV want from retrans?

A senior executive at satellite operator BSkyB has suggested that the occasion of commercial Public Service broadcaster ITV’s latest financial results may see the company give further details of its call for pay-TV platforms to start paying fees to the UK’s PSBs for the right to carry their main channels.

In a Blog post, Graham McWilliam, Group Director of Corporate Affairs at BSkyB, notes that more than two months have passed since ITV launched its lobbying effort with a report highlighting the impact of the system of fees that exists in the US market. “Despite its enthusiasm for the US comparison, we have heard nothing at all from ITV on the practical details of how such a scheme would be implemented in the UK. For example, we still don’t know whether ITV, like Channel 4, is in favour of additional regulation through the introduction of a fee set by Ofcom,” he says, adding that ITV has since gone silent, at least in public, about these issues.

“It was noticeable, for example, that ITV did not welcome publicly the Government’s announcement that it would review whether it was possible to reduce the regulation governing the relationship between platform operators and broadcasters,” he observes.

With that in mind, he sets out three key questions facing ITV ahead of this week’s results and offers his observations on each:

1. Does ITV favour a) increased regulation or b) de-regulation?

Genuine de-regulation would mean removing specific obligations on both PSBs and platforms so that an unfettered commercial negotiation can take place. For example, this would include removing the rules requiring Sky to carry PSB channels on its platform and to provide them with the top slots on our EPG. At present, we receive nothing in return for giving up these commercially valuable slots, which deliver audiences and advertising revenue to ITV.

2. Would ITV remove its main channel from a major platform?

The experience of the US market highlights a very clear risk that arises when broadcasters and platforms negotiate over fees. Millions of US viewers have been impacted by “blackouts” when channels are withdrawn for a period when negotiations break down. These are not rare events; there were over 100 examples in 2013 alone.

The UK’s public service system (which ITV says it remains committed to) is very different to the US and comes with expectations of universal availability. It would be interesting to know whether ITV envisages that it could remove its main channel from a major TV platform. In addition to the obvious disruption and inconvenience for millions of viewers, this would have a considerable impact on the advertisers who are ITV’s financial lifeblood.

3.Would ITV re-invest 100 per cent of any fees in public service programmes, over and above existing investment plans?

This is a source of real confusion. ITV has said that retransmission fees would allow PSBs to continue to invest in original programming. But the stock market is expecting windfall profits that would boost the value of the company. When ITV launched its campaign in September, this is what media analysts at Bank of America Merrill Lynch had to say: “An extra £100m of revenue could add c15% to profits and could be worth 40p /share.”

For ITV, this is the financial equivalent of having your cake and eating it. Although increased profits have obvious attractions, particularly given speculation about a takeover by a US buyer, it just isn’t possible to spend the extra cash on programmes and use it to top up profits at the same time.

According to McWilliam, these questions could easily be cleared up by ITV. “We watch with interest this week,” he concludes.